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SecureChoiceSavingsProgramPassesAssemblyCommittee

The Assembly Financial Institutions and Insurance Committee Monday approved by an 8-3 vote legislation (A4134) that would establish a retirement savings program for certain private sector employees, the “New Jersey Secure Choice Savings Program.” The Senate companion bill (S2891) was scheduled for consideration by the Senate Labor Committee on Sept. 12 but was held at the sponsor’s request.

Under the legislation, employees of medium to large companies that do not currently offer a qualified retirement savings program would be automatically enrolled in payroll deduction for a state-sponsored Individual Retirement Account (IRA). Employees would be able to opt-out of the program or adjust their deduction. If an employee fails to set a contribution level or opt-out of the program, the default contribution level is six-percent of the employee’s wages.

The legislation applies to private sector employers. Its provisions are mandatory for companies with at least 25 employees that have not had a qualified retirement plan in place for two years, and optional for companies with fewer than 25 employees or those that have been in business for less than two years. Other companies could participate voluntarily.

The bill makes no provisions to contract with private entities to invest the deposited funds. It sets up a public fund to be administered by the State to collect, administer and invest the funds. The fund would be overseen by a board appointed by the governor and legislative leaders.

Employees would be able choose from five investment options. The fund would be insured though it’s unclear for how much or what occurrences. Neither the State nor employers will bear liability for investment returns.

A similar measure was introduced in the 2014-2015 session, and a conditionally-vetoed (CV) version was signed by then-Governor Christie in January 2016. The CV made the plan optional for employers of all sizes and would have the investments made in private financial services firms. This bill essentially appears to reverse the CV.

As the measure represents public sector competition for savings dollars, and additional regulatory burden on credit unions, the League has joined a coalition of business and financial services trades to oppose it that includes the NJ Bankers Association, NJ Business and Industry Association, the Securities Industry and Financial Markets Association, and the American Council of Life Insurers.